Staff Report

Tobacco Products International (TPI): Give us a brief history of TTI.

Mariusz Stanek (MS): Our company has been operating on the Polish market for high-grade tobacco products and related accessories since 1994. In the beginning we had three employees and our headquarters were located in a small building adapted from a residential space in Kraków. In 1994, we solely offered tobacco, pipe and cigarette tobacco, as well as domestic pipes. Today we employ 45 people including 25 sales representatives, possess our own storeroom with high-quality storing capabilities and a modern office building.

Since 1997 we have been a member of the Business Centre Club and in 2001 we joined the group of associated companies on the Polish-German Chamber of Industry and Commerce. The company has won several prizes. It has received a Forebs Diamond and Business Gazelle.

TPI: What kind of retail outlets does TTI service?

MS: We guarantee distribution throughout the entire country. Twenty-five representatives and customer service department employees at the company headquarters in Modlnica near Kraków care for all of our clients. We offer are over 150 products, not only from various assortment groups but also from various price segments. For this reason we reach every type of recipient, including retail chains, warehouses, hotels, and restaurants, as well as small family-owned businesses. Our products reach our clients in two ways - either via sales representatives or directly from the central warehouse via a courier company. Orders are shipped exclusively in electronic form using representatives' mobile devices or a website specially prepared for this purpose, thanks to which the client can order the necessary selections on his own, check his payment balance and scheduled delivery times.

The products we distribute can be found in specialized tobacco shops, petrol stations, supermarkets and delis, off-licences, and newsstands.

TPI: What are some of your most popular bands/products that you import?

MS: Actually our entire portfolio is composed exclusively of well-known and popular international brands. Of course a few of them need to be particularly distinguished. I think that the most recognizable and simultaneously the most exclusive brand of cigars is Davidoff - a brand with a long and rich history with many immaculate products of the highest quality behind it. In the next product group, which contains cigarillos, Mehari's must be mentioned. This Dutch brand is sold in over 100 countries. Other brands that also cannot be omitted are Neos, J.Cortes and Cafe Creme.

Our portfolio also contains international brands such as Red Bull, Pöschl Tabak, Europe's largest snuff producer, Casablanca tobacco, Mascotte cigarette tubes and accessories, Also pipe tobacco and finally scented Black Devil cigarettes. The brands mentioned above are leaders in their product categories in Poland.

TPI: What percentage of your business deals with cigarettes, cigars, snuff, pipes etc? Do you see any trends shifting this balance?

MS: Concerning the categories mentioned, we can observe a few positive trends. The first is the constant increase in customers buying cigars and cigarillos. These products are becoming very fashionable stimulants, even among people who aren't addicted to smoking. They are products that distinguish and highlight one's personality; therefore people who are creative and ambitious buy them willingly. The high quality of cigarillos, their modern design and most importantly their price, which is close to that of a pack of king-size cigarettes, is significant in the growth of their sales.

The group of people who rarely or only occasionally smokes cigarettes and is looking for new flavours is growing significantly. They now find scented cigarettes such as Sunday's Fantasy, Black Devil, or Pink Elephant fashionable. These are well known on international markets and are available in our portfolio. Curiously enough, people are more willingly buying Pueblo cigarettes, which we recently introduced. They are 100% natural and made exclusively using tobacco leaves and water without chemical additives.

TPI: As far as premium cigars go, how open are Polish consumers to non-Cuban cigars? What have been some popular non-Cuban cigars?

MS: Unfortunately, in Poland as well as in other countries from our region, the belief that if you're going to have a long filler cigar, it has to be Cuban and best is if it is thigh-rolled by a beautiful Cuban woman. We're gradually informing our customers and attempting to abolish such stereotypes. It's a hard and long-term process, but it produces results. By offering exceptional and recognizable products of a unique and high quality, we are being asked more often to provide training on cigars and the testing of our products. We offer cigars that use tobacco leaves grown in the Dominican Republic, Honduras, and Nicaragua. Brands such as Davidoff, Zino, Private Stock, 3x3, Balmoral, J.Cortes, and Fuego are recognized by Polish aficionados. Of course other brands such as Cohiba, Romeo Y Julieta and Montecristo are also popular.

TPI: Do you forsee the EU ban on snus being lifted? If the ban is removed, will TTI get involved in the snus trade?

MS: We are against any type of administrative regulation of such issues. We believe that adults are able to decide on their own if and what they want to consume. The only limit should be good manners.

TPI: Does TTI get involved with marketing or advertising specific products, or are you entirely involved with distribution and retail?

MS: Our industry belongs to one of the most competitive and difficult markets among easily transferable products. This is why we try to take advantage of every legally permitted method of informing people about the products we distribute.

The promotion of our products takes place mainly at retail locations and distribution channels. One of the most currently powerful marketing instruments is merchandising due to a ban on public advertising. This includes constantly improved advertising media and product displays found at retail locations. Additionally we are present in industry and lifestyle press in which we try to portray the history and culture of smoking.

Certain actions in distribution channels are prepared either for the entire market or for select country regions or even designated distributors. Oftentimes these are promotional activities, which encourage the purchase of specific products where the rewards are both material and financial prizes, such as Sodexo certificates.

We also guarantee training for our subcontractors' employees, which are conducted by our representatives, and informational and educational materials.

An important part of our marketing activity is the educational actions mentioned above. We take part in many closed events where we have the opportunity of direct contact with the consumer, such as during International Pipe Smoking Day, the Polish Snuffing Championship, BCC Gala, and the Golf Business League. Our website also helps with educating people, where, apart from providing basic information on products, people who log on can find the Connoisseur's Club, a tobacco glossary, an events gallery and information concerning the health aspects of using tobacco products. People who are subscribed to our newsletter can take part in contests and surveys in addition to receiving literature on a regular basis.

TPI: Are there any specific tastes of Polish consumers versus other tobacco consumers in Europe? Do you see any emerging trends in regards to cigarettes, cigars, accessories, etc?

MS: A very important factor that influences the structure of the Polish market is the lack of tradition concerning smoking tobacco products other than cigarettes. For years the most popular tobacco product to buy were and still are cigarettes - the most widely known and recognizable tobacco stimulant in our society. The communist years created this product by completely pushing aside not only cigars, which were identified with capitalism and dedicated to the elite, but also cigarillos, pipes, and snuff. Creating a widely understood culture of smoking is not conducive to limiting access to specialized retail locations of high-quality tobacco products, i.e. tobacco shops, where a connoisseur can buy a good cigar and a novice can obtain professional advice. However, the fact that in recent years more and more consumers are reaching for products new to the market seems optimistic. For this reason, products such as cigarillos scented cigarettes or cigars have an ever-growing fan base.

TPI: Within Poland do you see any differences in tastes of consumers from different regions within the country?

MS: The diversity of regions based on the products purchased is of course noticeable in Poland as well. However this is caused by the differences in the wealth of the consumers in particular areas of the country and also by specific historical and geographical factors. In larger more affluent metropolitan areas, a larger interest in products such as cigars, cigarillos and scented cigarettes is noticeable, however in poor regions Fine Cut tobacco is purchased most often. In the Western part of the country, more premium class products are sold, whereas in the east, the exact opposite. Concerning historical and geographical circumstances, you can certainly say that both Silesia and the Pomorze region are the Polish kingdoms of snuff.

TPI: What are the current restrictions on smoking in Poland? Have any smoking restrictions affected TTI’s business?

MS: Yes, as in many European countries, there is a ban on the sale of tobacco products to minors and a complete ban on public advertising and the promotion of such products. Tobacco companies cannot be sponsors, cannot co-finance cultural and sporting events. In addition, companies from this section of industry operate in a very uncertain and unstable legal environment. Endless changes to excise tax rates, excise labels or even packaging negatively affect how companies both producing and selling tobacco products perform.

TPI: How has the current economic situation affected the buying habits of Polish consumers?

MS: From the perspective of the past dozen or so years, Polish society is becoming more and more affluent and with that comes the fact that particular customers can afford to buy higher-quality products. As a distributor specialized in exclusive and premium products, this change is very pleasing for us. However, we also offer products directed at less affluent smokers, such as cigarette tobacco, for example. Unfortunately, the massive increase in excise tax rates in the past year has made them unaffordable for most of these smokers who are guided by price in their choice. This has caused a significant increase in smuggling on an unprecedented scale.

TPI: What plans does TTI have going forward?

MS: Our plans for this year are to strengthen our position as a leader in categories such as cigars, cigarillos or even snuff. Gradually we want to, not only conquer, but also expand on the Polish market. We will continue to expand our selection and surprise customers with new products. Educating and informing our customers, proposing high and safe standards for co-operation, applying modern technology in every action we take. We will attempt to continue to surpass the competition and set trends. We hope that by the end of the year we will be able to celebrate further successes with our partners.

TPI: Anything else you would like to add?

MS: We sincerely invite you to Kraków for the EuroTab 2010 trade fair. At our company's stand you will be able to see our entire portfolio, try select products, talk to our team and also meet the representatives of given brands.